Kartu Money Laundering Issue Smells of Politics
27 October, 2011
Kartu Money Laundering Issue Smells of Politics

Money laundering suspicion regarding the Kartu Bank that is owned by Georgian tycoon Bidzina Ivanishvili, who recently declared about his political ambitions to run for presidential elections in 2013, smells of politics rather than a crime. 

Georgian law enforcers caught the encashment group of Kartu Bank red-handed in an alleged money-laundering attempt on October 18, 2011 when the group completed a usual transaction of encashment of USD 2 million and EUR 1 million at the Bank of Georgia (BOG) through their

partner banks of Deutsche Bank Trust Company Americas, Citibank International and Commerzbank in the US and Germany respectively.

Kartu was accused of money laundering; the money was apprehended and the criminal case was opened. BOG stepped aside as an innocent party.

Shortly before the alleged crime, top management of Kartu, which have been running the office for 10 years already, quit the bank on the same day after Ivanishvili accused Director General of squealing on the bank’s activities. Based on these two suspicious circumstances, National Bank of Georgia (NBG) decided to assign a two-month temporary administration in Kartu to research the internal problems at the bank.

Although, in its official statement the NBG accentuated that lately it regularly monitored Kartu but it found no particular infringements.

According to Davit Narmania, Board Chairman of the Center for Economic Problems Research, it is impossible that Kartu, which the NBG has been supervising periodically, could undertake money laundering. He doubts the matter has political lining since it coincided with political reanimation of Ivanishvili, who declared about his political ambitions on October 7, 2011.

Giorgi Kadagidze, President of the NBG, ruled out political lining of the alleged crime and stressed that encashment of USD 2 million and EUR 1 million is not an ordinary deal especially for salary needs [as the media reported new Kartu management’s words] as far as salaries in Georgia are paid  in national currency via non-cash plastic card-based transfers.

Besides, usually encashment of big sums is transacted through the NBG and Kartu might solve the problem at the NBG but it did not apply to NBG, Kadagidze accentuated in his repeated official statements released on October 19-20, 2011.

Nodar Javakhishvili, a newly assigned Director General of Kartu Bank, counters that the reason of big sums encashment was a political crackdown on Kartu clientele who started to withdraw money from their accounts.

“To meet this demand we had to back our cash office through such ‘extraordinary’ sums,” he told Georgian Journal.  “And not for the salary needs as my words were misinterpreted…the Kartu implemented this kind of encashment operations about 200 times this year without any accident. Not of such big quantities but in June we implemented USD 4 million worth encashment and the NBG did not even take any notice unlike this precedent. ”

Encashment transactions in compliance with Georgian law are allowed through both NBG and inter-bank operations but the difference is that inter-bank transactions are free of charge while the NBG charges this kind of deals; therefore banks prefer inter-banks deals. So did Kartu.

According to Soso Tsiskarishvili, an economic-political expert, if money laundering really took place it was the BOG that should be accused in the crime first of all since the suspicious cash was taken from BOG that is not involved in the criminal case as yet.

However, Kadagidze has no questions with the BOG as yet for he finds it to be just “a transit chain” although he promises to get interested if questions arise in respect of BOG.

What makes experts suspicious over the ad-hoc anti-laundering operation implemented by the task force of the Interior Ministry is the fact that internationally renowned financial organizations like Deutsche Bank Trust Company Americas, Citibank International and Commerzbank with much more developed anti-money laundering systems did not get suspicious. The NBG did not explain this gap in the logical chain of the Kartu ‘criminal story’ irrespective the GJ inquiry. Also, it does not disclose the source that reported the suspicious activity to the law enforcing body.

According to the currently activated anti-money-laundering law, all financial institutions are obliged to report suspicious deals to the Financial Monitoring Service, the anti-money-laundering body with the NBG, which accordingly gives the signal to the Prosecutors’ Office and law enforcers. Neither the NBG nor BOG makes statements to this end.

Narmania believes that cash at a commercial bank cannot be particularly suspicious if due documentation identifying the money origins and destination to a concrete commercial bank is attached to it.

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